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Asset Performance Evaluation and Asset Management Strategy.

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Presentation on theme: "Asset Performance Evaluation and Asset Management Strategy."— Presentation transcript:

1 Asset Performance Evaluation and Asset Management Strategy

2 Who we?  Mervyn Jones, Head of Housing Consultancy  Nigel Page, Director, Housing Consultancy

3 Asset Performance CWAG Decision Making Asset Management Strategy New homes and asset strategy Delivery Mechanisms Future environment

4 How do you behave? Cobblers and Kwikfit!

5 Do all properties perform equally?

6 Understanding the performance of your assets  Measure the long term performance of your property portfolio  Use modelling techniques to analyse worth to the business plan  Provides an objective baseline on which to make investment decisions and demonstrate value for money  Identifies properties requiring an option appraisal

7 So what is effective asset management?  In –depth and consistent understanding of:  Local markets  The long term performance of the overall property portfolio  The investment performance of each individual property  The outcomes you require  Unlocking potential, building capacity, releasing resources

8 Balancing your objectives: Effective asset management  Incorporates the return on your investment  The triple bottom line  Economic  Social  Environmental Bearable Social Environment Economic Equitable Sustainable Viable

9 How do we measure performance and worth?  Group similar properties - Asset Groups  Separate analysis for non housing assets  Assemble data - agree assumptions  Generate cash flows  Review outputs- sense check  Agree candidate list of poor performers and understand performance drivers  Agree next steps – e.g.  Run scenarios  Prepare position statement  Asset Management Strategy  Programme of Options Appraisals


11 Net cash flow per annum Example of different groups of properties

12 Output Area Profiles: Future Values

13 Not all about the money – social returns Source: Savills APE model

14 Presentation of results - 30 yr NPV in GIS

15 Additional analysis - yield  Green = yield measured by annual gross income / vp value  Red = the number of properties at each yield value

16 Additional analysis – Underlying asset value

17 Using asset performance to set decision framework  Something for something  At each letting – series of decisions  Preparing for conversions and considering disposal strategies – avoiding delay and maximising value at each letting  Flagging/traffic lighting in operations systems  Asset registers  Key missing information – legal and political constraints on action Asset Group UnitsNPVSoc rentAff rentT/OYieldOMV A9-£4,051£67.04£ %£166,303 B24-£3,412£50.43£ %£128,866 C8-£1,935£51.28£ %£123,800 D89-£1,415£88.50£ %£128,866 E28£414£92.02£ %£128,866 F7£1,264£64.79£ %£128,866 G3£2,357£68.26£ %£128,866 H11£2,806£69.22£ %£94,300 I31£2,856£67.70£ %£107,997 J26£4,499£106.57£ %£128,866 K24£4,942£59.54£ %£128,866 L15£6,782£107.62£ %£128,866 Source: Example from other RP’s use of asset model 17

18 So what? – active asset management strategy  Strengthen business plan  Make more efficient use of capital resources available  Consider long-term planning for obsolescence  Obtain a balance between new build, remodelling & stock investment  Test alternative strategies  Enable balanced investment decisions and support difficult decision making  Communicate reasons to members, staff and residents  Assist the organisation in delivering its social, financial and housing objectives

19 Case study – Circle Housing Group  Asset performance evaluation as part of strategy to “Optimise value through assets”  Over 50,000 homes across 9 RP partners  Data collection and cleansing from multiple sources – data improvement plan now in place  Support streamlined decision making and coherent strategy within complex group structure  Identify group wide benchmarks for performance improvement  Vacant disposals and tenanted transfers Market Value NPV

20 Case study – Southampton Council  Asset performance evaluation linked to regeneration strategy  Six estates identified for social/economic reasons  Asset performance evaluated to identify land assembly and phasing options  Supporting partnership working with RPs and developers combined with direct Council delivery

21 New homes and asset strategy  Increasing Supply is a Duty  There is a Duty to Maximise the Use of Public Land  Value for Money is being redefined to link to new supply  Regeneration is the Best Route to Improved Social Outcomes  Regeneration/Redevelopment will be the only way to reduce fuel poverty/carbon dioxide emissions.

22 2 million homes from Public Land? Knowns: Central Government estate 600,000 GLA land 100,000+ Known Unknowns: NHS300,000+ Local Authorities1,000,000 As many as 2 million homes?

23 Unknowns: What do we know about LA land? Source: DCLG: Value of LA land and buildings 31 March 2014  Local authorities - 46% of public estate  LA Land and Property: DCLG/ Audit Comm £114 bn March 2014  Localis estimates LAs will develop £13.4 billion worth in next five years  HRA self financing – regen & densification opportunities

24 Unknowns: What do we know about LA land? Source: DCLG: Value of LA land and buildings 31 March 2014  Council Housing: £66 billion  2 million houses  Self financing – review assets  Regeneration and Intensification of council housing - Savills unpublished research  More and better housing  New streets  Strengthen communities

25 Investment strategy – riding the long term property cycle??  Value uplift potential  Unlocking hidden value  house prices  travel times  quality of place

26 Unknowns: LA Land: How many homes?  Not done detailed work – no coherent assets data  What order of magnitude?  Much local authority land is urban  We followed approach similar to public land  Scope for intensification/ reconfiguration of operational sites Perhaps another 1m capacity if there is appetite to intensify? 1,000,000

27 Unknowns: Local Authority Land - Case Study LB Ealing: pulling info together, doing more LB Ealing: Strategic assessment of various council depts land holdings (yellow) alongside HRA land (purple)

28 Delivery Mechanisms  Asset Management Strategies – will need to be much more dynamic  APE is a suite of business plans by asset group that add up the HRA Business Plan  Integration of asset data into financial plans  Stress Testing  Asset registers – will need to support much more dynamic activity, including charging and disposal.  Options Appraisal – these will have to be widened from modernise/remodel/redevelop to cover develop for market housing and sell vacant/build elsewhere.

29 Delivery Mechanisms  The Debt Cap is not....  Council sponsored companies  PWLB borrowing  Use of RtB receipts  Mixed tenure development  Ways Forward – more commercial skills or partnership with private developers and FPRPs?

30 Delivery Mechanisms  ALMO lead or Council lead?  These are strategies about capital: improving value and making investment  ALMO could be agent, but the Council is the asset owner  Managing conflicting interests  EG decanting and new letting can be inconvenient to an ALMO

31 Future environment  Lyons Report  Elphicke and House  Policy Exchange  Institution building  The Alternative  managed decline  “Council Estates” look incongruously old fashioned  surrounded by improved private street property (with extensions and mega- basements) or ranks of modern tower blocks

32 Recent clients Over the last 3 yrs we’ve modelled 35 RPs and LAs with a total stock of over 350,000

33 Contact details Mervyn Jones Nigel Page

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